UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, DC  20549



FORM 10-Q



[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the Quarter Ended September 30, 2019



[   ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



Commission File Number

001-09071

BBX Capital Corporation

(Exact name of registrant as specified in its charter)





 

 

Florida

 

59‑2022148

(State or other jurisdiction of incorporation or organization)

 

(I.R.S Employer Identification No.)



 

 

401 East Las Olas Boulevard, Suite 800

 

 

Fort Lauderdale, Florida

 

33301

(Address of principal executive office)

 

(Zip Code)







(954) 940-4900

(Registrant's telephone number, including area code)





 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $.01 par value

(including associated Preferred Share Purchase Rights)

BBX

New York Stock Exchange

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



YES [X]NO [   ]



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



YES [X]NO [   ]



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





 

 

 

Large accelerated filer [ ]

Accelerated filer[X]

Non-accelerated filer [ ]

Smaller reporting company [ ] 

Emerging growth company [ ]

 

 

 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.[    ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



YES [   ]NO [ X ]

The number of shares outstanding of each of the registrant’s classes of common stock as of October 29, 2019 is as follows:

 

Class A Common Stock of $.01 par value,  76,932,065 shares outstanding.
Class B Common Stock of $.01 par value, 18,627,873 shares outstanding.



 


 

 





 

 



 

 



 

 

BBX Capital Corporation

TABLE OF CONTENTS



Part I.



 

 

Item 1.

Financial Statements

 



 

 



Condensed Consolidated Statements of Financial Condition as of September 30, 2019 and December 31, 2018 - Unaudited



 

 



Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 - Unaudited



 

 



Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30,  2019 and 2018 - Unaudited



 

 



Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018 - Unaudited



 

 



Notes to Condensed Consolidated Financial Statements - Unaudited



 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

33 



 

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

58 



 

 

Item 4.

Controls and Procedures

58 



 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

58 



 

 

Item 1A.

Risk Factors

59 



 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

59 



 

 

Item 6.

Exhibits

60 



 

 



Signatures

61 





  

 

 

 


 

 





PART I  FINANCIAL INFORMATION



Item 1. Financial Statements















 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Financial Condition - Unaudited

(In thousands, except share data)



 

 

 

 



 

 

 

 



 

September 30, 2019

 

December 31, 2018

ASSETS

 

 

 

 

Cash and cash equivalents

$

368,818 

 

366,305 

Restricted cash ($19,185 in 2019 and $28,400 in 2018 in variable interest entities ("VIEs"))

 

48,597 

 

54,792 

Notes receivable, net ($299,374 in 2019 and $341,975 in 2018 in VIEs)

 

445,706 

 

439,167 

Trade inventory

 

25,126 

 

20,110 

Vacation ownership interest ("VOI") inventory

 

346,821 

 

334,149 

Real estate ($12,074 in 2019 and $20,202 in 2018 held for sale)

 

59,574 

 

54,956 

Investments in unconsolidated real estate joint ventures

 

53,739 

 

64,738 

Property and equipment, net

 

131,422 

 

139,628 

Goodwill

 

37,248 

 

37,248 

Intangible assets, net

 

68,342 

 

69,710 

Operating lease assets

 

110,435 

 

 -

Other assets

 

121,610 

 

124,217 

Total assets

$

1,817,438 

 

1,705,020 



 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

29,206 

 

29,537 

Deferred income 

 

20,323 

 

16,522 

Escrow deposits

 

25,149 

 

22,255 

Other liabilities

 

128,318 

 

104,441 

Receivable-backed notes payable - recourse

 

94,904 

 

76,674 

Receivable-backed notes payable - non-recourse (in VIEs)

 

341,856 

 

382,257 

Notes payable and other borrowings

 

161,420 

 

200,887 

Junior subordinated debentures

 

137,038 

 

136,425 

Operating lease liabilities

 

124,129 

 

 -

Deferred income taxes

 

90,695 

 

86,363 

Redeemable 5% cumulative preferred stock of $.01 par value; authorized 15,000 shares;

 

 

 

 

issued and outstanding 10,000 shares in 2019 and  2018 with a stated value of $1,000 per share

 

9,730 

 

9,472 

Total liabilities

 

1,162,768 

 

1,064,833 

Commitments and contingencies (See Note 11)

 

 

 

 

Redeemable noncontrolling interest

 

2,229 

 

2,579 

Equity:

 

 

 

 

Preferred stock of $.01 par value; authorized 10,000,000 shares

 

 -

 

 -

Class A Common Stock of $.01 par value; authorized 150,000,000 shares;

 

 

 

 

issued and outstanding 76,580,091 in 2019 and 78,379,530 in 2018 

 

766 

 

784 

Class B Common Stock of $.01 par value; authorized 20,000,000 shares;

 

 

 

 

issued and outstanding 14,840,534 in 2019 and 14,840,634 in 2018

 

148 

 

148 

Additional paid-in capital

 

162,183 

 

161,684 

Accumulated earnings

 

392,167 

 

385,789 

Accumulated other comprehensive income

 

1,420 

 

1,215 

Total shareholders' equity

 

556,684 

 

549,620 

Noncontrolling interests

 

95,757 

 

87,988 

Total equity

 

652,441 

 

637,608 

Total liabilities and equity

$

1,817,438 

 

1,705,020 



 

 

 

 



 

 

 

 

See Notes to Condensed Consolidated  Financial Statements - Unaudited













1

 


 

 





















 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited

(In thousands, except per share data)



 

 

 

 

 

 

 

 



 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,



 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Sales of VOIs 

$

66,318 

 

70,698 

 

186,351 

 

195,412 

Fee-based sales commissions

 

60,478 

 

61,641 

 

161,033 

 

167,581 

Other fee-based services

 

33,744 

 

31,057 

 

94,015 

 

89,472 

Cost reimbursements

 

21,111 

 

16,900 

 

58,705 

 

47,157 

Trade sales

 

47,660 

 

43,803 

 

138,705 

 

126,114 

Sales of real estate inventory

 

370 

 

7,478 

 

5,030 

 

17,138 

Interest income

 

21,797 

 

21,157 

 

64,730 

 

63,738 

Net gains on sales of real estate assets

 

399 

 

-

 

11,395 

 

4,802 

Other revenue

 

3,237 

 

1,669 

 

7,540 

 

4,278 

Total revenues

 

255,114 

 

254,403 

 

727,504 

 

715,692 

Costs and Expenses:

 

 

 

 

 

 

 

 

Cost of VOIs sold

 

3,121 

 

11,237 

 

17,541 

 

19,838 

Cost of other fee-based services

 

23,746 

 

19,937 

 

66,538 

 

53,983 

Cost reimbursements

 

21,111 

 

16,900 

 

58,705 

 

47,157 

Cost of trade sales

 

31,860 

 

28,957 

 

94,978 

 

88,045 

Cost of real estate inventory sold

 

 -

 

4,655 

 

2,643 

 

11,283 

Interest expense

 

11,870 

 

11,130 

 

34,679 

 

30,869 

Recoveries from loan losses, net

 

(1,821)

 

(443)

 

(4,206)

 

(7,258)

Impairment losses

 

4,030 

 

193 

 

6,786 

 

549 

Selling, general and administrative expenses

 

148,549 

 

143,559 

 

448,510 

 

410,359 

Total costs and expenses

 

242,466 

 

236,125 

 

726,174 

 

654,825 

Equity in net earnings of unconsolidated real estate joint ventures

 

28,534 

 

373 

 

37,276 

 

1,165 

Foreign exchange gain (loss) 

 

 -

 

76 

 

(24)

 

91 

Income before income taxes

 

41,182 

 

18,727 

 

38,582 

 

62,123 

Provision for income taxes

 

(14,682)

 

(6,742)

 

(15,068)

 

(21,997)

Net income

 

26,500 

 

11,985 

 

23,514 

 

40,126 

Less: Net income attributable to noncontrolling interests

 

4,112 

 

5,806 

 

11,275 

 

16,324 

Net income attributable to shareholders

$

22,388 

 

6,179 

 

12,239 

 

23,802 



 

 

 

 

 

 

 

 

Basic earnings per share

$

0.24 

 

0.07 

 

0.13 

 

0.25 

Diluted earnings per share

$

0.24 

 

0.06 

 

0.13 

 

0.24 

Basic weighted average number of common shares outstanding

 

92,587 

 

93,193 

 

93,002 

 

95,722 

Diluted weighted average number of common and common equivalent shares outstanding

 

94,059 

 

96,576 

 

94,306 

 

98,971 

Cash dividends declared per Class A common share

$

0.0125 

 

0.010 

 

0.0375 

 

0.030 

Cash dividends declared per Class B common share

$

0.0125 

 

0.010 

 

0.0375 

 

0.030 



 

 

 

 

 

 

 

 

Net income

$

26,500 

 

11,985 

 

23,514 

 

40,126 

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Unrealized gain (loss) on securities available for sale

 

16 

 

(11)

 

54 

 

(11)

Foreign currency translation adjustments

 

(75)

 

66 

 

151 

 

62 

Other comprehensive (loss) income, net

 

(59)

 

55 

 

205 

 

51 

Comprehensive income, net of tax

 

26,441 

 

12,040 

 

23,719 

 

40,177 

Less: Comprehensive income attributable to noncontrolling interests

 

4,112 

 

5,806 

 

11,275 

 

16,324 

Comprehensive income attributable to shareholders

$

22,329 

 

6,234 

 

12,444 

 

23,853 



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited























2

 


 

 



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Three Months Ended September 30, 2019 and 2018

(In thousands)



 

 

 

 

 

 

 

 

 

 

 



Shares of

 

 

 

 

 

Accumulated

 

 

 



Common Stock

 

Common

 

 

Other

 

 

 



Outstanding

 

Stock

Additional

 

Comprehen-

Total

Non-

 



Class

 

Class

Paid-in

Accumulated

sive

Shareholders'

controlling

Total



A

B

 

A

B

Capital

Earnings

Income

Equity

Interests

Equity

Balance, June 30, 2018

79,257  13,936 

$

793  139  175,002  370,262  1,452  547,648  91,629  639,277 

Net income excluding $208 of income attributable to redeemable noncontrolling interest

 -

 -

 

 -

 -

 -

6,179 

 -

6,179  5,598  11,777 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

55  55 

 -

55 

Distributions to noncontrolling interests

 -

 -

 

 -

 -

 -

 -

 -

 -

(6,021) (6,021)

Class A common stock cash dividends declared

 -

 -

 

 -

 -

 -

(809)

 -

(809)

 -

(809)

Class B common stock cash dividends declared

 -

 -

 

 -

 -

 -

(179)

 -

(179)

 -

(179)

Purchase and retirement of common stock

 -

 -

 

 -

 -

(17)

 -

 -

(17)

 -

(17)

Purchase and retirement of common stock  from vesting of restricted stock awards

(375) (137)

 

(4) (1) (3,777)

 -

 -

(3,782)

 -

(3,782)

Issuance of common stock from vesting of restricted stock awards

535 

 -

 

 -

(5)

 -

 -

 -

 -

 -

Share-based compensation

 -

 -

 

 -

 -

3,645 

 -

 -

3,645 

 -

3,645 

Balance, September 30, 2018

79,417  13,799 

$

794  138  174,848  375,453  1,507  552,740  91,206  643,946 



 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

77,978  14,841 

$

780  148  166,015  370,983  1,479  539,405  92,948  632,353 

Net income excluding $82 of income attributable to redeemable noncontrolling interest

 -

 -

 

 -

 -

 -

22,388 

 -

22,388  4,030  26,418 

Purchase and retirement of common stock

(1,398)

 -

 

(14)

 -

(7,001)

 -

 -

(7,015)

 -

(7,015)

Other comprehensive loss

 -

 -

 

 -

 -

 -

 -

(59) (59)

 -

(59)

Distributions to noncontrolling interests

 -

 -

 

 -

 -

 -

 -

 -

 -

(1,221) (1,221)

Class A common stock cash dividends declared

 -

 -

 

 -

 -

 -

(962)

 -

(962)

 -

(962)

Class B common stock cash dividends declared

 -

 -

 

 -

 -

 -

(242)

 -

(242)

 -

(242)

Share-based compensation

 -

 -

 

 -

 -

3,169 

 -

 -

3,169 

 -

3,169 

Balance, September 30, 2019

76,580  14,841 

$

766  148  162,183  392,167  1,420  556,684  95,757  652,441 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited









3

 


 

 













 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Nine Months Ended September 30, 2019 and 2018

(In thousands)



 

 

 

 

 

 

 

 

 

 

 



Shares of

 

 

 

 

 

Accumulated

 

 

 



Common Stock

 

Common

 

 

Other

 

 

 



Outstanding

 

Stock

Additional

 

Comprehen-

Total

Non-

 



Class

 

Class

Paid-in

Accumulated

sive

Shareholders'

controlling

Total



A

B

 

A

B

Capital

Earnings

Income

Equity

Interests

Equity

Balance, December 31, 2017

85,689  13,963 

$

857  140  228,331  354,432  1,708  585,468  82,054  667,522 

Cumulative effect from the adoption of ASU 2016-01

 -

 -

 

 -

 -

 -

252  (252)

 -

 -

 -

Net income excluding $58 of loss attributable to redeemable noncontrolling interest

 -

 -

 

 -

 -

 -

23,802 

 -

23,802  16,382  40,184 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

51  51 

 -

51 

Distributions to noncontrolling interests

 -

 -

 

 -

 -

 -

 -

 -

 -

(8,263) (8,263)

Increase in noncontrolling interest from loan foreclosure

 -

 -

 

 -

 -

 -

 -

 -

 -

704  704 

Purchase of noncontrolling interest

 -

 -

 

 -

 -

(587)

 -

 -

(587) 329  (258)

Class A common stock cash dividends declared

 -

 -

 

 -

 -

 -

(2,492)

 -

(2,492)

 -

(2,492)

Class B common stock cash dividends declared

 -

 -

 

 -

 -

 -

(541)

 -

(541)

 -

(541)

Purchase and retirement of common stock

(6,486)

 -

 

(65)

 -

(60,076)

 -

 -

(60,141)

 -

(60,141)

Purchase and retirement of common stock from vesting of restricted stock awards

(375) (137)

 

(4) (1) (3,777)

 -

 -

(3,782)

 -

(3,782)

Conversion of common stock from Class B to Class A

27  (27)

 

(1)

 -

 -

 -

 -

 -

 -

Issuance of common stock from vesting of restricted stock awards

535 

 -

 

 -

(5)

 -

 -

 -

 -

 -

Issuance of common stock from exercise of options

27 

 -

 

 -

 -

245 

 -

 -

245 

 -

245 

Share-based compensation

 -

 -

 

 -

 -

10,717 

 -

 -

10,717 

 -

10,717 

Balance, September 30, 2018

79,417  13,799 

$

794  138  174,848  375,453  1,507  552,740  91,206  643,946 



 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

78,379  14,841 

$

784  148  161,684  385,789  1,215  549,620  87,988  637,608 

Cumulative effect from the adoption of ASU 2016-02, net of income taxes and redeemable noncontrolling interest

 -

 -

 

 -

 -

 -

(2,202)

 -

(2,202)

 -

(2,202)

Net income excluding $158 of loss attributable to redeemable noncontrolling interest

 -

 -

 

 -

 -

 -

12,239 

 -

12,239  11,433  23,672 

Purchase and retirement of common stock

(1,799)

 -

 

(18)

 -

(8,880)

 -

 -

(8,898)

 -

(8,898)

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

205  205 

 -

205 

Distributions to noncontrolling interests

 -

 -

 

 -

 -

 -

 -

 -

 -

(3,664) (3,664)

Class A common stock cash dividends declared

 -

 -

 

 -

 -

 -

(2,933)

 -

(2,933)

 -

(2,933)

Class B common stock cash dividends declared

 -

 -

 

 -

 -

 -

(726)

 -

(726)

 -

(726)

Share-based compensation

 -

 -

 

 -

 -

9,379 

 -

 -

9,379 

 -

9,379 

Balance, September 30, 2019

76,580  14,841 

$

766  148  162,183  392,167  1,420  556,684  95,757  652,441 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited







4

 


 

 















 

 

 

 

 



 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

 

 

 

 



 

For the Nine Months Ended

September 30,

 



 

2019

 

2018

 

Operating activities:

 

 

 

 

 

Net income

$

23,514 

 

40,126 

 

Adjustment to reconcile net income to net cash

 

 

 

 

 

provided by operating activities:

 

 

 

 

 

Recoveries from loan losses, net

 

(4,206)

 

(7,258)

 

Provision for notes receivable allowances

 

39,462 

 

35,866 

 

Depreciation, amortization and accretion, net

 

21,150 

 

18,557 

 

Share-based compensation expense

 

9,379 

 

10,717 

 

Net gains on sales of real estate

 

(11,395)

 

(4,798)

 

Equity earnings of unconsolidated real estate joint ventures

 

(37,276)

 

(1,165)

 

Return on investment in unconsolidated real estate joint ventures

 

38,020 

 

5,233 

 

Increase in deferred income tax

 

5,210 

 

20,465 

 

Impairment losses

 

6,786 

 

549 

 

Interest accretion on redeemable 5% cumulative preferred stock

 

633 

 

854 

 

Increase in notes receivable

 

(46,001)

 

(48,492)

 

Increase in VOI inventory

 

(12,672)

 

(23,405)

 

(Increase) decrease in trade inventory

 

(5,016)

 

2,286 

 

(Increase) decrease in real estate inventory

 

(2,865)

 

9,990 

 

Net change in operating lease asset and operating lease liability

 

1,134 

 

 -

 

Increase in other assets

 

(3,852)

 

(24,712)

 

Increase in other liabilities

 

38,389 

 

8,774 

 

Net cash provided by operating activities

 

60,394 

 

43,587 

 

Investing activities:

 

 

 

 

 

Return of investment in unconsolidated real estate joint ventures

 

30,331 

 

6,586 

 

Investments in unconsolidated real estate joint ventures

 

(20,076)

 

(1,755)

 

Proceeds from repayment of loans receivable

 

4,766 

 

17,930 

 

Proceeds from sales of real estate held-for-sale

 

20,374 

 

17,121 

 

Proceeds from sales of property and equipment

 

15,011 

 

569 

 

Additions to real estate held-for-sale and held-for-investment

 

(438)

 

(1,102)

 

Purchases of property and equipment

 

(26,286)

 

(33,316)

 

Decrease in cash from other investing activities

 

(73)

 

(5,072)

 

Net cash provided by investing activities

 

23,609 

 

961 

 



 

 

 

(Continued)

 











5

 


 

 















 

 

 

 

 

BBX Capital Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

 

 

 

 



 

For the Nine Months Ended

September 30,



 

2019

 

2018

 

Financing activities:

 

 

 

 

 

Repayments of notes payable and other borrowings

 

(171,061)

 

(152,204)

 

Proceeds from notes payable and other borrowings

 

99,921 

 

196,439 

 

Payments for debt issuance costs

 

(351)

 

(1,131)

 

Payments of interest on redeemable 5% cumulative preferred stock

 

(375)

 

(438)

 

Purchase and retirement of Class A common stock

 

(8,898)

 

(60,141)

 

Purchase of noncontrolling interest

 

 -

 

(258)

 

Proceeds from the exercise of stock options

 

 -

 

245 

 

Dividends paid on common stock

 

(3,257)

 

(2,822)

 

Distributions to noncontrolling interests

 

(3,664)

 

(8,263)

 

Net cash used in financing activities

 

(87,685)

 

(28,573)

 

(Decrease) increase in cash, cash equivalents and restricted cash

 

(3,682)

 

15,975 

 

Cash, cash equivalents and restricted cash at beginning of period 

 

421,097 

 

409,247 

 

Cash, cash equivalents and restricted cash at end of period 

$

417,415 

 

425,222 

 



 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings, net of amounts capitalized

$

30,252 

 

27,807 

 

Income taxes paid

 

10,873 

 

3,103 

 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

Construction funds receivable transferred to real estate

 

15,890 

 

8,716 

 

Acquisition of VOI inventory, property and equipment for notes payable

 

 -

 

24,258 

 

Loans receivable transferred to real estate

 

333 

 

1,673 

 

  Reduction in note receivable from holder of redeemable 5% cumulative preferred stock

 

 -

 

(5,000)

 

Reduction in redeemable 5% cumulative preferred stock

 

 -

 

4,862 

 

  Increase in other assets upon issuance of Community Development District Bonds

 

8,110 

 

 -

 

Assumption of Community Development District Bonds by builders

 

1,035 

 

4,573 

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

Cash and cash equivalents

 

368,818 

 

369,512 

 

Restricted cash

 

48,597 

 

55,710 

 

Total cash, cash equivalents, and restricted cash

$

417,415 

 

425,222 

 



 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited

 































 

6

 


 

 





BBX Capital Corporation

Notes to Condensed Consolidated Financial Statements - Unaudited





1.    Organization and Basis of Financial Statement Presentation



Organization



BBX Capital Corporation and its subsidiaries (the “Company” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” or “our”) is a Florida-based diversified holding company. BBX Capital Corporation as a standalone entity without its subsidiaries is referred to as “BBX Capital.”



BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 22% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 78% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 84% and 16%, respectively, at September  30, 2019. Class B common stock is convertible into Class A common stock on a share for share basis at any time at the option of the holder.



Basis of Financial Statement Presentation



The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, these financial statements do not include all of the information and disclosures required by GAAP for complete financial statements.



In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, that are necessary for a fair statement of the condensed consolidated financial condition of the Company at September  30, 2019; the condensed consolidated results of operations and comprehensive income of the Company for the three and nine months ended September 30, 2019 and 2018; the condensed consolidated changes in equity of the Company for the three and nine months ended September  30, 2019 and 2018; and the condensed consolidated cash flows of the Company for the nine months ended September  30, 2019 and 2018. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or any other future period.



These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 12, 2019. 



The condensed consolidated financial statements include the accounts of BBX Capital’s wholly-owned subsidiaries, other entities in which BBX Capital or its subsidiaries hold controlling financial interests, and any VIEs in which BBX Capital or one of its consolidated subsidiaries is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated in consolidation.



Certain amounts for prior periods have been reclassified to conform to the presentation for the current period.



Principal Investments



The Company’s principal investments include Bluegreen Vacations Corporation (“Bluegreen” or “Bluegreen Vacations”), BBX Capital Real Estate LLC (“BBX Capital Real Estate”), Renin Holdings, LLC (“Renin”), and IT’SUGAR, LLC (“IT’SUGAR”).



Bluegreen is a leading vacation ownership company that markets and sells VOIs and manages resorts in popular leisure and urban destinations. Bluegreen’s resort network includes 45 Club Resorts (resorts in which owners in the Bluegreen Vacation Club (“Vacation Club”) have the right to use most of the units in connection with their VOI ownership) and 24 Club Associate Resorts (resorts in which owners in Bluegreen’s Vacation Club have the right to use a limited

7

 


 

 

number of units in connection with their VOI ownership). Bluegreen markets, sells, and manages VOIs in resorts, which are generally located in popular, high-volume, “drive-to” vacation destinations, including Orlando, Las Vegas, Myrtle Beach, Charleston, and New Orleans, among others. Through its points-based system, the approximately 219,000 owners in Bluegreen’s Vacation Club have the flexibility to stay at units available at its resorts and have access to over 11,350 other hotels and resorts through partnerships and exchange networks. The resorts in which Bluegreen markets, sells, or manages VOIs were either developed or acquired by Bluegreen or were developed and are owned by third parties. Bluegreen earns fees for providing sales and marketing services to third party developers. Bluegreen also earns fees for providing management services to the Vacation Club and homeowners’ associations (“HOAs”), mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to qualified VOI purchasers, which generates significant interest income.



BBX Capital Real Estate is engaged in the acquisition, development, construction, ownership, financing, and management of real estate and investments in real estate joint ventures. In addition, BBX Capital Real Estate owns a 50% equity interest in The Altman Companies, LLC (the “Altman Companies”), a developer and manager of multifamily apartment communities, and manages the legacy assets acquired in connection with the Company’s sale of BankAtlantic in 2012, including portfolios of loans receivable and real estate properties.



Renin is engaged in the design, manufacture, and distribution of sliding doors, door systems and hardware, and home décor products and operates through its headquarters in Canada and two manufacturing and distribution facilities in the United States and Canada. In addition to its own manufacturing, Renin also sources various products and raw materials from China.



IT’SUGAR is a specialty candy retailer which operates approximately  100 retail locations in over 25 states and Washington D.C. Its products include bulk candy, candy in giant packaging, and novelty items that are sold at its retail locations, which include a mix of high-traffic resort and entertainment, lifestyle, mall/outlet, and urban locations across the United States.



In addition to its principal investments, the Company has investments in various operating businesses, including companies in the confectionery industry.



In 2016, Food for Thought Restaurant Group (“FFTRG”), a wholly-owned subsidiary of BBX Capital, entered into area development and franchise agreements with MOD Super Fast Pizza (“MOD Pizza”) related to the development of up to approximately 60 MOD Pizza franchised restaurant locations throughout Florida. Through 2019, FFTRG had opened nine restaurant locations. As a result of FFTRG’s overall operating performance and the Company’s goal of streamlining its investment verticals, the Company entered into an agreement with MOD Pizza to terminate the area development and franchise agreements and transferred seven of its restaurant locations, including the related assets, operations, and lease obligations, to MOD Pizza during the third quarter of 2019. In addition, the Company closed the remaining two locations and terminated the related lease agreements. In connection with the transfer of the seven restaurant locations to MOD Pizza, the Company recognized an aggregate impairment loss of $4.0 million related to the disposal group, which included property and equipment, intangible assets, and net lease liabilities, during the three months ended September 30, 2019. In addition to the impairment losses recognized during the third quarter of 2019, the Company previously recognized $2.7 million of impairment losses associated with property and equipment at three restaurant locations. Accordingly, the Company recognized $6.7 million of impairment losses associated with its investment in MOD Pizza restaurant locations during the nine months ended September 30, 2019.



Recently Adopted Accounting Pronouncements



The Financial Accounting Standards Board (“FASB”) has issued the following Accounting Standards Updates (“ASU”) and guidance relevant to the Company’s operations which were adopted as of January 1, 2019:



ASU No. 2016-02 – Leases (Topic 842). This standard, as subsequently amended and clarified by various ASUs, requires lessees to recognize assets and liabilities for the rights and obligations created by leases of assets. For income statement purposes, the standard retains a dual model which requires leases to be classified as either operating or finance based on criteria that are largely similar to those applied under prior lease accounting but without explicit bright lines. The standard also requires extensive quantitative and qualitative disclosures, including significant judgments and assumptions made by management in applying the standard, intended to provide greater insight into the amount, timing, and uncertainty of cash flows arising from leases.



8

 


 

 

The Company adopted the standard on January 1, 2019 and applied the transition guidance as of the date of adoption under the current-period adjustment method. As a result, the Company recognized right-of-use assets and lease liabilities associated with its leases on January 1, 2019, with a cumulative-effect adjustment to the opening balance of accumulated earnings, while the comparable prior periods in the Company’s financial statements have been and will continue to be reported in accordance with Topic 840, including the disclosures of Topic 840. 



The standard includes a number of optional practical expedients under the transition guidance. The Company elected the package of practical expedients which allowed the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs. The Company also made accounting policy elections by class of underlying asset to not apply the recognition requirements of the standard to leases with terms of 12 months or less and to not separate non-lease components from lease components. Consequently, each separate lease component and the non-lease components associated with that lease component is accounted for as a single lease component for lease classification, recognition, and measurement purposes.



Upon adoption of the standard on January 1, 2019, the Company recognized a lease liability of $123.2 million and a right-of-use asset of $113.2 million. The difference between the lease liability and right-of-use asset primarily reflects the reclassification of accrued straight-line rent and unamortized tenant allowances from other liabilities in the Company’s statement of financial condition to a reduction of the right-of-use asset. In addition, the Company recognized an impairment loss of $3.4 million in connection with the recognition of right-of-use assets for certain IT’SUGAR retail locations as a cumulative-effect adjustment to the opening balance of accumulated earnings. The implementation of the standard did not have a material impact on the Company’s statement of operations and comprehensive income or statement of cash flows. See Note 12 for additional information regarding the Company’s lease agreements.



Future Adoption of Recently Issued Accounting Pronouncements



The FASB has issued the following accounting pronouncements and guidance relevant to the Company’s operations which had not been adopted by the Company as of September  30, 2019: 



ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (as subsequently amended and clarified by various ASUs).  This standard introduces an approach of estimating credit losses on certain types of financial instruments based on expected losses and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating its allowance for credit losses. In addition, the standard requires entities to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). The standard also allows entities to irrevocably elect to measure certain financial instruments within the scope of the standard at fair value upon the adoption of the standard. This standard will be effective for the Company on January 1, 2020. The Company is currently evaluating the impact that ASU 2016-13 may have on its consolidated financial statements. 



ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies the disclosure requirements in Topic 820 related to the valuation techniques and inputs used in fair value measurements, uncertainty in measurement, and changes in measurements applied. This standard will be effective for the Company on January 1, 2020. The Company believes that this standard will not have a material impact on its consolidated financial statements and disclosures.











2.    Consolidated Variable Interest Entities 



Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen and are designed to provide liquidity for Bluegreen and to transfer the economic risks and benefits of the notes receivable to third parties. In a securitization, various classes of debt securities are issued by the special purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable. Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties generally based on market conditions at the time of the securitization.



In these securitizations, Bluegreen generally retains a portion of the securities and continues to service the securitized notes receivable. Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen; however, to the extent

9

 


 

 

the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are required to be distributed on an accelerated basis to investors. Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger event is cured. As of September  30, 2019, Bluegreen was in compliance with all material terms under its securitization transactions, and no trigger events had occurred.



In accordance with the applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreen has a variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. Bluegreen bases its quantitative analysis on the forecasted cash flows of the entity and its qualitative analysis on the structure of the entity, including its decision-making ability and authority with respect to the entity, and relevant financial agreements. Bluegreen also uses qualitative analysis to determine if Bluegreen must consolidate a VIE as the primary beneficiary. In accordance with the applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements.



Under the terms of certain VOI note sales, Bluegreen has the right to repurchase or substitute a limited amount of defaulted notes for new notes at the outstanding principal balance plus accrued interest. Bluegreen’s voluntary repurchases and substitutions of defaulted notes for the nine months ended September 30, 2019 and 2018 were $8.4 million and $4.4 million, respectively. Bluegreen’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.



The table below sets forth information regarding the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s condensed consolidated statements of financial condition (in thousands):







 

 

 

 



 

 

 

 



 

September 30,

 

December 31,



 

2019

 

2018

Restricted cash

$

19,185 

 

28,400 

Securitized notes receivable, net

 

299,374 

 

341,975 

Receivable backed notes payable - non-recourse

 

341,856 

 

382,257 





The restricted cash and the securitized notes receivable balances disclosed in the table above are restricted to satisfy obligations of the VIEs.

 





3.    Notes Receivable



The table below sets forth information relating to Bluegreen’s notes receivable and related allowance for loan losses (in thousands):





 

 

 

 



 

 

 

 



 

September 30,

 

December 31,



 

2019

 

2018

Notes receivable:

 

 

 

 

VOI notes receivable - non-securitized

$

188,435 

 

124,642 

VOI notes receivable - securitized

 

391,922 

 

447,850 

Notes receivable secured by homesites (1)

 

694 

 

898 

Gross notes receivable

 

581,051 

 

573,390 

Allowance for loan losses - non-securitized

 

(42,728)

 

(28,258)

Allowance for loan losses - securitized

 

(92,548)

 

(105,875)

Allowance for loan losses - homesites (1)

 

(69)

 

(90)

Notes receivable, net

$

445,706 

 

439,167 

Allowance as a % of gross notes receivable

 

23% 

 

23% 





(1)

Notes receivable secured by homesites were originated through a business, substantially all the assets of which were sold by Bluegreen in 2012.    



10

 


 

 

The weighted-average interest rate charged on Bluegreen’s notes receivable was 14.9% and 15.1% at September 30, 2019 and December 31, 2018, respectively. Bluegreen’s VOI notes receivable bear interest at fixed rates and are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee,  and Wisconsin.



Credit Quality of Notes Receivable and the Allowance for Loan Losses



Bluegreen monitors the credit quality of its receivables on an ongoing basis. Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables as Bluegreen does not believe that there are significant concentrations of credit risk with any individual counterparty or groups of counterparties. In estimating loan losses, Bluegreen does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a static pool analysis that incorporates the aging of the respective receivables, default trends, and prepayment rates by origination year, as well as the FICO scores of the borrowers.



The activity in Bluegreen’s allowance for loan losses (including notes receivable secured by homesites) was as follows (in thousands):



 

 

 

 



 

For the Nine Months Ended



 

September 30,



 

2019

 

2018

Balance, beginning of period

$

134,222 

 

123,791 

Provision for loan losses

 

39,462 

 

35,866 

Write-offs of uncollectible receivables

 

(38,339)

 

(31,358)

Balance, end of period

$

135,345 

 

128,299 



 

 

 

 





The table below sets forth information regarding the percentage of gross notes receivable outstanding by FICO score of the borrower at the time of origination:





 

 

 

 



 

 

 

 



September 30,

 

December 31,

 

FICO Score

2019

 

2018

 

700+

59.00 

%

57.00 

%

600-699

38.00 

 

39.00 

 

<600

2.00 

 

3.00 

 

No score (1)

1.00 

 

1.00 

 

Total

100.00 

%

100.00 

%



(1)

VOI notes receivable attributable to borrowers without a FICO score are primarily related to foreign borrowers.



The table below sets forth information regarding the delinquency status of Bluegreen’s VOI notes receivable (in thousands):





 

 

 

 



 

 

 

 



 

September 30,

 

December 31,



 

2019

 

2018

Current

$

547,425 

 

541,783 

31-60 days

 

6,797 

 

5,783 

61-90 days

 

5,271 

 

4,516 

> 91 days (1)

 

20,864 

 

20,410 

Total

$

580,357 

 

572,492 



(1)

Includes $10.8 million and $14.3 million of VOI notes receivable as of September 30, 2019 and December 31, 2018, respectively, that, as of such dates, had defaulted but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s receivable-backed notes payable transactions. These VOI notes receivable have been included in the allowance for loan losses.

 





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4.     Trade Inventory



The Company’s trade inventory consisted of the following (in thousands):







 

 

 

 



 

 

 

 



 

September 30,

 

December 31,



 

2019

 

2018

Raw materials

$

3,204 

 

2,718 

Paper goods and packaging materials

 

1,572 

 

1,122 

Finished goods

 

20,350 

 

16,270 

Total trade inventory

$

25,126 

 

20,110 









5.     VOI Inventory



Bluegreen’s VOI inventory consisted of the following (in thousands):





 

 

 

 



 

 

 

 



 

September 30,

 

December 31,



 

2019

 

2018

Completed VOI units

$

271,441 

 

237,010 

Construction-in-progress

 

1,542 

 

26,587 

Real estate held for future VOI development

 

73,838 

 

70,552 

Total VOI inventory

$

346,821 

 

334,149 









6.    Real Estate  



The Company’s real estate consisted of the following (in thousands):







 

 

 

 



 

 

 

 



 

September 30,

 

December 31,



 

2019

 

2018

Real estate held-for-sale:

 

 

 

 

Land

$

10,204 

 

18,439 

Residential single-family

 

719 

 

832 

Other

 

1,151 

 

931 

Total real estate held-for-sale

 

12,074 

 

20,202 

Real estate held-for-investment:

 

 

 

 

Land

 

6,002 

 

10,976 

Total real estate held-for-investment

 

6,002 

 

10,976 

Real estate inventory

 

41,498 

 

23,778 

Total real estate

$

59,574 

 

54,956 



In April 2019, the Company sold its remaining land parcels located at PGA Station in Palm Beach Gardens, Florida for net proceeds of $8.3 million and recognized a gain on sale of real estate of $1.8 million during the nine months ended September 30, 2019. In connection with the sale, the Company invested $2.1 million of the proceeds in the PGA Lender, LLC joint venture as described in Note 7 below.



In May 2019, the Company transferred RoboVault, a self-storage facility located in Fort Lauderdale, Florida, from property and equipment to real estate held-for-sale following a buyer’s completion of due diligence on the property and subsequently sold it to the buyer for net proceeds of $11.8 million. As a result of the sale, the Company recognized a gain on sale of real estate of $4.8 million during the nine months ended September 30, 2019. 



In June 2019, the Company sold a land parcel located in St. Cloud, Florida that was previously held for investment for net proceeds of $8.7 million and recognized a gain on sale of real estate of $3.0 million during the nine months ended September 30, 2019. 



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7.     Investments in Unconsolidated Real Estate Joint Ventures 



As of September 30, 2019, the Company had equity interests in unconsolidated real estate joint ventures involved in the development of multifamily apartment and townhome communities, as well as single-family master planned communities. In addition, the Company own